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LEASES | 9 Months Ended
--- | ---
Sep. 30, 2019
Leases [Abstract] |
LEASES | LEASES We lease vehicles, equipment, property and other non-core equipment in the ordinary course of our business. Leases are classified as either operating leases or finance leases, as appropriate. Our leases have varying terms and may include renewal or purchase options, escalation clauses, restrictions, lease concessions, capital project funding, penalties or other obligations that we considered historically in determining minimum rental payments. We recognize lease expense for operating leases on a straight-line basis over the lease term. We recognize depreciation expense for finance leases over either the useful life of the asset or the lease term based on the terms of the lease agreement. We are also party to landfill operation and management agreements. These agreements are long-term landfill operating contracts with government bodies whereby we receive tipping revenue, pay normal operating expenses and assume future final capping, closure and post-closure obligations. The government body retains ownership of the landfill. There is no bargain purchase option and title to the property does not pass to us at the end of the lease term. We allocate the consideration paid to the landfill airspace rights and underlying land lease based on the relative fair values. In addition to up-front or one-time payments, the landfill operating agreements may require us to make future minimum rental payments, including success/expansion fees, other direct costs and final capping, closure and post-closure costs. The value of all future minimum rental payments is amortized and charged to cost of operations over the life of the contract on a units-of-consumption basis as airspace is utilized (e.g., as tons are placed into the landfill). The underlying value of any land lease is amortized to cost of operations on a straight-line basis over the estimated life of the operating agreement. As a part of the implementation of Topic 842, we elected to adopt the practical expedient package and to not elect the hindsight practical expedient in determining lease term. The practical expedient package allowed us to: 1) not reassess lease classification for existing leases; 2) not reassess whether a contract contains a lease for existing contracts; and 3) not reassess initial direct costs for existing leases. Accordingly, we retained the operating lease and finance lease classifications in all periods presented and did not alter Topic 840 accounting over operating leases in place at transition allowing us to use historical minimum rental payments when determining the right-of-use asset and lease liability for existing operating leases. Upon adopting this guidance, we recognized a right-of-use asset and a lease liability for core leases classified as operating leases with a term in excess of 12 months in our consolidated balance sheet. For other non-core operating leases, which is comprised of small-dollar-value items such as office equipment, we continued to expense these costs in the period incurred rather than capitalizing such expenditures on our consolidated balance sheet. Accounting for finance leases was not impacted by the adoption of this guidance. Under Topic 842, we identify lease and nonlease components in a contract to which consideration in the contract will be allocated. As an election, we may elect by class of underlying asset to choose not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components in a contract as part of the single lease component. We have elected to not separate lease components from nonlease components for property leases and are, therefore, not allocating consideration between lease and nonlease components for this asset class. Lease payments include: fixed payments, including in-substance fixed payments, less any lease incentives paid or payable to the lessee; variable lease payments that depend on an index or a rate; exercise price of a purchase option reasonably certain to be exercised; penalties for terminating a lease; and amounts where it is probable that we will owe under a residual value guarantee. Refundable deposits are not considered to be a fixed payment. Variable lease costs that are not based on an index or a rate are recorded to expense in the period incurred. Lease term is determined at lease commencement, and includes any noncancellable period for which we have the right to use the underlying asset together with any periods covered by an option to extend or terminate the lease if we are reasonably certain to exercise the option to extend or not to exercise the option to terminate. The initial determination of a lease liability is calculated as the net present value of the lease payments not yet paid. The discount rate used to determine present value is the rate implicit in the lease, if present, or, if not present, our incremental borrowing rate, which is a rate that reflects interest that we would have to pay to borrow funds on a collateralized basis over a similar term to the lease and in a similar economic environment. For shorter term leases, such as vehicle and equipment leases, we calculate our incremental borrowing rate using the interest rate from our existing secured line of credit, adjusted based on term. For longer term leases, such as our landfill operating leases, we calculate our incremental borrowing rate based on an industry yield curve with a similar credit rating, adjusted by a company specific spread as determined by a third-party. A schedule of lease costs and other lease information follows:
| Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Lease cost: |  |  |
Amortization of right-of-use assets | $ | 593 |  |  | $ | 1,505 |
Interest expense | 213 |  |  | 555 |
Fixed lease cost - vehicles, equipment and property | 2,351 |  |  |  | 7,271 |
Fixed lease cost - landfill operating leases | 1,957 |  |  |  | 5,580 |
Fixed lease cost | 4,308 |  |  | 12,851 |
Short-term lease cost | 853 |  |  | 2,261 |
Variable lease cost | 329 |  |  | 712 |
Total lease cost | $ | 6,296 |  |  | $ | 17,884 |
Other information: |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Financing cash flows for finance leases | $ | 666 |  |  | $ | 1,870 |
Operating cash flows for operating leases | $ | 2,963 |  |  | $ | 9,837 |
Right-of-use assets obtained in exchange for new finance lease liabilities | $ | — |  |  | $ | 6,857 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 831 |  |  | $ | 1,419 |
|  |  | September 30, 2019
Weighted-average remaining lease term - finance leases (years) |  |  | 6.7
Weighted-average remaining lease term - operating leases (years) |  |  | 12.0
Weighted-average discount rate - finance leases |  |  | 5.2 | %
Weighted-average discount rate - operating leases |  |  | 5.2 | %
Estimated minimum future lease obligations are as follows:
| Operating Leases |  | Finance Leases
Fiscal year ending December 31, 2019 | $ | 3,792 |  |  | $ | 799 |
Fiscal year ending December 31, 2020 | 13,218 |  |  | 3,872 |
Fiscal year ending December 31, 2021 | 10,870 |  |  | 3,336 |
Fiscal year ending December 31, 2022 | 8,494 |  |  | 2,740 |
Fiscal year ending December 31, 2023 | 6,652 |  |  | 2,572 |
Thereafter | 69,323 |  |  | 6,924 |
Total lease payments | 112,349 |  |  | 20,243 |
Less: interest expense | (30,857) |  |  | (3,733) |
Lease liability balance | $ | 81,492 |  |  | $ | 16,510 |
LEASES | LEASES We lease vehicles, equipment, property and other non-core equipment in the ordinary course of our business. Leases are classified as either operating leases or finance leases, as appropriate. Our leases have varying terms and may include renewal or purchase options, escalation clauses, restrictions, lease concessions, capital project funding, penalties or other obligations that we considered historically in determining minimum rental payments. We recognize lease expense for operating leases on a straight-line basis over the lease term. We recognize depreciation expense for finance leases over either the useful life of the asset or the lease term based on the terms of the lease agreement. We are also party to landfill operation and management agreements. These agreements are long-term landfill operating contracts with government bodies whereby we receive tipping revenue, pay normal operating expenses and assume future final capping, closure and post-closure obligations. The government body retains ownership of the landfill. There is no bargain purchase option and title to the property does not pass to us at the end of the lease term. We allocate the consideration paid to the landfill airspace rights and underlying land lease based on the relative fair values. In addition to up-front or one-time payments, the landfill operating agreements may require us to make future minimum rental payments, including success/expansion fees, other direct costs and final capping, closure and post-closure costs. The value of all future minimum rental payments is amortized and charged to cost of operations over the life of the contract on a units-of-consumption basis as airspace is utilized (e.g., as tons are placed into the landfill). The underlying value of any land lease is amortized to cost of operations on a straight-line basis over the estimated life of the operating agreement. As a part of the implementation of Topic 842, we elected to adopt the practical expedient package and to not elect the hindsight practical expedient in determining lease term. The practical expedient package allowed us to: 1) not reassess lease classification for existing leases; 2) not reassess whether a contract contains a lease for existing contracts; and 3) not reassess initial direct costs for existing leases. Accordingly, we retained the operating lease and finance lease classifications in all periods presented and did not alter Topic 840 accounting over operating leases in place at transition allowing us to use historical minimum rental payments when determining the right-of-use asset and lease liability for existing operating leases. Upon adopting this guidance, we recognized a right-of-use asset and a lease liability for core leases classified as operating leases with a term in excess of 12 months in our consolidated balance sheet. For other non-core operating leases, which is comprised of small-dollar-value items such as office equipment, we continued to expense these costs in the period incurred rather than capitalizing such expenditures on our consolidated balance sheet. Accounting for finance leases was not impacted by the adoption of this guidance. Under Topic 842, we identify lease and nonlease components in a contract to which consideration in the contract will be allocated. As an election, we may elect by class of underlying asset to choose not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components in a contract as part of the single lease component. We have elected to not separate lease components from nonlease components for property leases and are, therefore, not allocating consideration between lease and nonlease components for this asset class. Lease payments include: fixed payments, including in-substance fixed payments, less any lease incentives paid or payable to the lessee; variable lease payments that depend on an index or a rate; exercise price of a purchase option reasonably certain to be exercised; penalties for terminating a lease; and amounts where it is probable that we will owe under a residual value guarantee. Refundable deposits are not considered to be a fixed payment. Variable lease costs that are not based on an index or a rate are recorded to expense in the period incurred. Lease term is determined at lease commencement, and includes any noncancellable period for which we have the right to use the underlying asset together with any periods covered by an option to extend or terminate the lease if we are reasonably certain to exercise the option to extend or not to exercise the option to terminate. The initial determination of a lease liability is calculated as the net present value of the lease payments not yet paid. The discount rate used to determine present value is the rate implicit in the lease, if present, or, if not present, our incremental borrowing rate, which is a rate that reflects interest that we would have to pay to borrow funds on a collateralized basis over a similar term to the lease and in a similar economic environment. For shorter term leases, such as vehicle and equipment leases, we calculate our incremental borrowing rate using the interest rate from our existing secured line of credit, adjusted based on term. For longer term leases, such as our landfill operating leases, we calculate our incremental borrowing rate based on an industry yield curve with a similar credit rating, adjusted by a company specific spread as determined by a third-party. A schedule of lease costs and other lease information follows:
| Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Lease cost: |  |  |
Amortization of right-of-use assets | $ | 593 |  |  | $ | 1,505 |
Interest expense | 213 |  |  | 555 |
Fixed lease cost - vehicles, equipment and property | 2,351 |  |  |  | 7,271 |
Fixed lease cost - landfill operating leases | 1,957 |  |  |  | 5,580 |
Fixed lease cost | 4,308 |  |  | 12,851 |
Short-term lease cost | 853 |  |  | 2,261 |
Variable lease cost | 329 |  |  | 712 |
Total lease cost | $ | 6,296 |  |  | $ | 17,884 |
Other information: |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Financing cash flows for finance leases | $ | 666 |  |  | $ | 1,870 |
Operating cash flows for operating leases | $ | 2,963 |  |  | $ | 9,837 |
Right-of-use assets obtained in exchange for new finance lease liabilities | $ | — |  |  | $ | 6,857 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 831 |  |  | $ | 1,419 |
|  |  | September 30, 2019
Weighted-average remaining lease term - finance leases (years) |  |  | 6.7
Weighted-average remaining lease term - operating leases (years) |  |  | 12.0
Weighted-average discount rate - finance leases |  |  | 5.2 | %
Weighted-average discount rate - operating leases |  |  | 5.2 | %
Estimated minimum future lease obligations are as follows:
| Operating Leases |  | Finance Leases
Fiscal year ending December 31, 2019 | $ | 3,792 |  |  | $ | 799 |
Fiscal year ending December 31, 2020 | 13,218 |  |  | 3,872 |
Fiscal year ending December 31, 2021 | 10,870 |  |  | 3,336 |
Fiscal year ending December 31, 2022 | 8,494 |  |  | 2,740 |
Fiscal year ending December 31, 2023 | 6,652 |  |  | 2,572 |
Thereafter | 69,323 |  |  | 6,924 |
Total lease payments | 112,349 |  |  | 20,243 |
Less: interest expense | (30,857) |  |  | (3,733) |
Lease liability balance | $ | 81,492 |  |  | $ | 16,510 |

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